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www.lasvegasmtg.com Report: The Untold Truth About Par Rate

By John Le Francois

www.lasvegasmtg.com Report: The Untold Truth About Par Rate is different for each individual borrower! Investopedia.com defines Mortgage Par Rate as: An interest rate used as the reference point for which a Mortgage Lender will neither pay a rebate ( Yield Spread Premium or Negative Points ) or require discount points for a Mortgage.

With the definition from Investopedia.com we have as the basis that a Par Rate would be a zero YSP and a zero cost to the borrower. In today's market a Par Rate is as unique to each borrower as their finger prints are unique to every other person in the world. Why is this even remotely possible? I'm glad you asked.

Every Investor has a different risk tolerance that is reflected in their rates they post each day. The higher the risk the higher the rate. I will only be using one of my primary lenders for this article and their Pricing Adjustment. Risks are the overlays the lender have defined by these factors:

• FICO Score

Conventional loans have 7 different Adjustment hits for determining par rate.

FHA and VA have 5 different Adjustment hits for determining par rate.

• Loan Amount

Conventional Loans can have as many as 6 Adjustment hits for loan amount.

FHA and VA loans can have as many as 4 Adjustment hits for loan amount.

• State Location

Conventional, FHA, and VA loans have 1 Adjustment hit for State Location.

• Building Type, SFR, Condo, Duplex and Fourplex.

Conventional Loans can have 4 Adjustment hits for building type.

• Loan Type

FHA and Conventional Loans do not have any Adjustment hits for Loan Type.

VA has 1 Adjustment for Loan Type.

• Occupancy Type

FHA and VA do not have any Adjustment for Owner Occupied. 

Conventional Loans for Owner Occupied and 2nd homes do not have any Adjustment hits.

Conventional Loans have two Adjustment hits for Investors and LTV. 

• Loan to Value

FHA and VA Loans do not have Adjustment hits for LTV.

Conventional Loans can have 4 Adjustment hits for LTV that are also tied to FICO Scores and Occupancy Type.

As you can see there are so many variables that can determine what Par Rate would be based on specifics to each borrower and co-borrower that no two borrowers would have exactly the same rate. The last factor is the volatility of rate changes that can and do occur on a daily basis. Locking the rate in the morning could have a different result in the afternoon.   

                                                                                                          

John Le Francois Senior Loan Officer All Western Mortgage Inc. 8345 W. Sunset Rd. Suite 200 Las Vegas, NV, 89113 US	Work: 702-947-0648 Mobile: 702-271-2659 Fax: 702-541-9901 jlefrancois@awmlv.com http://www.lasvegasmtg.com
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www.lasvegasmtg.com Report: Ben Bernanke presents the Feds exit plan from the Economic Stimulus today! What was discussed and the effects would it have on the real estate market in Las Vegas, NV. will be discussed here.

Ben Bernanke was supposed to have met in sworn testimony in front of the House Financial Services Committee, but this was canceled do to the weather conditions in Washington. So Benanke's prepared statement was released today to the press since it was not delivered as planned to the committee.

Ben Bernanke stated the feds discount rate will soon see a modest increase from its current rate range of 0% to .25%. This is the rate that the Feds lend to the banks for short term loans. The reason for this Fed policy change is the Feds believe that the financial industry is seeing improvement and is returning to normalcy. Ben Bernanke does not believe that the Feds policy change will affect the ability for consumers or businesses to obtain credit.

The Feds have been walking a tight rope walk in trying to keep the economy from collapsing and from inflationary pressure due to its loose monetary policy to keep from going into a full scale recession. While it is interesting that the Feds are seeing signs of a economic recovery and a return to normalcy, will its move to put the brakes on it's economic policy cause a double dip in the recovery?

Add to this policy change and the end of the government purchase of Mortgage backed securities slated for April 30th, 2010 that have kept rates currently so low, rates for mortgages will have to go up in the near future. To see the impact this would have on current real estate transaction in Las Vegas, Nevada see the chart below. I have taken the median price and the median income for first time home buyers in considering the impact these changes will have on future purchases in Las Vegas, Nevada.

As you can see the purchasing power will be decreased by $13,000.00 less with 1% increase in rates. First time home buyers that are sitting on the fence waiting for prices to fall lower will only be priced out of the market with higher rates. Please let your clients know that rates will go up. The question is when!

                                                                                                          

John Le Francois Senior Loan Officer All Western Mortgage Inc. 8345 W. Sunset Rd. Suite 200 Las Vegas, NV, 89113 US	Work: 702-947-0648 Mobile: 702-271-2659 Fax: 702-541-9901 jlefrancois@awmlv.com http://www.lasvegasmtg.com
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